Last week Morningstar held their annual investment conference in Chi-town. I wasn’t able to get there but it was heavily tweeted and the folks at M’Star have done a great job at getting the highlights online. They have an article about with five things the pros seemed most vexed about, including this bit on Treasury bonds:
If there was any agreement on any one item at the conference, it was that Treasuries are trouble right now.
Steve Walsh from Western Asset Management seemed to summarize most participants’ views that Treasuries are being used as an insurance policy against bad outcomes at the moment. They aren’t being treated as an investment. Money is flowing into the asset class from around the world as a safe haven to protect against a breakdown in Europe or a hard landing in the Chinese economy. Add in the Federal Reserve’s massive amounts of easing and unprecedented easy money policy, and you have the recipe for an asset whose pricing has become unmoored from economic fundamentals. Accepting what will almost certainly be a negative real return during the next decade just didn’t make sense to most speakers at the conference. Franklin Templeton’s Michael Hasenstab might have said it best when he described Treasuries as a risk-free asset no more.
There are four others, including No Good Use for Cash, head over below for the rest: